Ep 25: 80/20 Concept when it Comes to Stock Trading

February 19th, 2015

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Welcome to the Rapid Recap, I’m Sasha Evdakov and today is February 19th 2015 so today we’ll cover the 80/20 concept and we'll also talk about some stock insights. In this Rapid Recap we're going to cover probably about 10 to 11 stocks and later on we’ll post some critical charts as well and we’ll probably cover about 20-25 charts in there.

After viewing the Rapid Recap you might get an insight of why I post more charts in the critical charts than I do in the Rapid Recap and a lot of that has to do with this 80/20 concept, the 80/20 percent. For those of you that don't know about it, we’ll get into detail and how this applies to stock trading.

First I do want to give an announcement that you know some people's AOLS email accounts, I can’t send emails to those accounts and I've noticed that looking at some forms that AOL has some very strict parameters for sending emails and I think with stock trading or anything related to stocks they kind of think of it as being spam or you know all those advertisements like binary options and everything like that.

If you're trying to send me e-mail then just use the phone number on the website or include your phone number that way we can get a hold with you if you're having any trouble or you have any questions I'll try to get back to you as quickly as I can just because I got an overwhelming amount of email and I do what I can in terms of getting back to people.

With that in mind I do want to let you know I do have the Trading with Technical Analysis Course in my hand, I do have it complete, the only thing left is really just to shoot the video and let you know what it's really all about and what's in it but I’ve tested it and looks great everything came out fantastic and we're going to include some really great giveaways with that course whether you decide to buy that course or not we’re going to do a few great promotion so keep an eye out for that.

Let's get started and a let's just talk some stocks and also some principles. I do want to talk about the 80/20 concept and the 80/20 principles during this video. Now the market isn’t fully closed yet. It’s 3:48 3:49 Eastern Time so as I'm recording this and it’s pretty much wrapping up so most of the things are wrapping up where they’re going to be unless something dramatic happens.

In general if we look at the S&P we’re pushing higher towards the upper range and if we take a look at it this way you can see that we did start to pop a little higher but to me personally it's a little weak but that doesn't mean can’t go higher . So when the market is acting weak that doesn't mean there isn't any trades available, that doesn't mean you can't trade.

It just means you're little more cautious. It just means you know you don't throw everything including the kitchen sink in your trades. Similar to if you're looking to buy a house or a car you basically don't take every single penny in your bank account and go ahead and say ok I’m going to buy this car for a hundred thousand dollars or five hundred thousand dollars and I don't have anything else to live on.

You don't throw everything at once now when the market is moving in a nice very healthy uptrend it's breaking higher than you might throw a little bit more in there up but most of the time you know you want to be a little cautious and slowly add or take off positions.

As things go in your favor you take some off, as things are moving a little choppy again you take some off. As things maybe come back to support and bounce you might add some.

You're always playing this game of adding and subtracting risk, you're trying to rebalance your position based on market conditions and it's kind of based on the energy that it gives and as you watch stocks and as you look at stocks there's going to be thousands of stocks that you can really look at.

Out one of those stocks is ISRL. Now you can take take a look at this stock and you can say okay well where's the chart pattern, where's the stock going what is it going to do and these stocks are messy and choppy and there's hundreds of them and there's so many stocks out there that are very choppy.

They're not great stocks, they're not very particularly useful in terms of trading because they have a lower probability but people still want to trade different stocks. So even looking at this stock right here, just take a look at it. Look at where’s a nice clean pattern.

You might say well there's a little clean pattern from here to here and then you might say okay we have another little pattern from here to here and you could say that but when I’m looking to place my money into something I’m looking for the best of the best. Why would I want to trade the worst stocks or why would I not want to trade the best of the best?

For me personally, I want to do the highest quality job possible whether that's choosing a stock or whether that's picking your friends. You want the highest quality possible that you can get. Same thing with the eating, I try and eat a lot of vegetarian related food now I'm not vegan or vegetarian.

I do like to barbecue and Grill but you try and get the best of the best so that way you're running efficiently or you get the best of the best friends because why would you want to hang out with jerks, why would you want to associate with people that are not great people and old don’t value to their life.

It's kind of like the concept of take your five closest friends and you average those people to gather and the end result is you. The same theory take care five best picks or five best stocks that you have and the end result is going to be your profits or the way things are running.

In theory why would you filter or scan, let's just move this over a bit, why would you filter and scan through all these stocks. Just look at all of them, all these stocks right here that we have, there's so many stocks and you could go through all these all day long but instead why trade all of them when you just need a few of the best of the best stocks.

Some people that wonder why do I not post 40, a 100, or 200 charts you know whether that's in a Rapid Recap or whether that's in critical charts and it's because you don't need to trade every stock possible you just need a few really good stocks to make your year that's all you need and just let them it in that crockpot and let them simmer, let them cook. Let them cook nice and slow and do your thing.

With this in mind, think about that concept it makes life a lot easier doesn’t it? But we complicate things, we make things harder, we try and you know trade this one and that one and this one and that one because we're chasing.

Let me share with you a few different stocks, some insight and maybe you’ll get some ideas for “hey am I trading the worst of the breeds or am I trading the better of the breeds.

Let's just start with Apple. I talked about this one in the critical charts a handful of times I was short this one back here in this region and the this level and if I was going to break lower here I was going to enter it short but things have changed so when they change you adjust.

Here looking at these swing point highs stock was pressing higher and higher you get into the stock and you get a nice six dollar gain in just a of couple days or in about a week case so if it comes back to this line and it bounces then you can add to the position why would I trade a stock that’s choppy and messy.

There's no need for that if you had a hundred shares of this stock time six dollars that’s six hundred dollars for many people that's a life changer on a day to day or week to week basis.

Now I know not everybody can afford a hundred shares of Apple but even ten shares that’s 60 bucks, 60 bucks will put meal on the table for a lot of families in the world and I know I've been there you know sixty dollars is a lot of money too many people but what we like to do as traders we try and chase the gains going after stocks and losing our cash.

Why do we do that? We give our money away to the markets where instead you could just be giving it to somebody that's more needy you know I'd rather sit out of the trade and not waste my money then you know or give it to somebody that needs it rather than just you know letting the market take it so be patient and wait for these setups and you got a nice little gain and pop so Apple's been moving well.

Now today we got 26 cents down but hey that's fine that's okay you know if you got in it even the second day you still had a nice little run and we're not looking for one or two day runs you know if you get into the stocks at the right time, let's look at this this run.

If you get into the stocks even a second or third day over here and you get that run that’s a thirteen dollar even if you got in second day and Even if you got in the fourth day that’s still a twelve dollar run.

Even if you missed half their move and half to run and here's your little consolidation pattern, you still got seven dollar run in that run right there but here we try and chase for stocks like this stock and we’re like okay well let's trade this one or we try and trade this one.

This one’s going to go higher it’s going to pop or we try and do the 1-800-Flowers popped pretty well recently but we try and chase these penny stocks and you know they do get some pops here and there but the majority of them you know they're cheap for a reason and that's the that's the shares factors that they're cheap for a reason.

Even here we got Sprint popular company but just look at this chart I mean come on this is the monthly chart look at it at the highs that’s 68 and now it's been two dollars since 2009.

If we do AMD just take a look at this one bends 2009 as well two to three bucks. So pick the best of breed and you got people you know I used to be one of them try and get into these stocks over here, I’m looking at a here and I’m saying oh my god it's going up its going to go higher and then you know mentors and so forth-star get me to look at the big chart and change it to the month.

Is it going higher? I don't think so it may within five years, three years or ten years who knows by you know but I would be chasing over here in the zoomed in way, can't see the forest from the trees you know you only see that 20 percent.

You're not seeing the rest of that eighty percent of the view that you should be seeing and I'd be chasing these stocks looking for those gains and it's not the right way to do it.

Here's AXP talked about this one, here we have the short side, short play. Here was the resistance stock popped and rejected those came down, pop again, rejected those, selling off and continues so that's kind of what happens with some stocks. Once they get going they continue for a little while until momentum and energy can build but it takes time.

It takes time to fix a flat tire, it takes time to cook soup, it takes time to grill whatever chicken wings or steak, it takes time and certain types of stocks take longer. If you’re cooking a steak it’s a shorter time period, if you're cooking chicken that's going to take a little bit longer. If you're cooking a soup it may take even longer so just depends on the stock.

Take a look at BIDU, here we have support and resistance line. Right there stock broke BOM went down and went lower you can even go to the lowest here if you want. We can take it right here and you can see that the stock broke these levels came back retested it and then rejected. Got heavy volume on the sell off so even though it attempted to get over that still continuing kind of lowers with the energy. Where's that energy?

If you take it out to the weekly you can see that the weekly the bar is red. If we take it out to the monthly this is seeing you know the forest, the other eighty percent. The monthly the bar is also red. Is everything in alignment? So far so good we're good we're cooking, we’re cooking.

Facebook here's a little change up for you. I was looking at this one to break lower and I was awakened waiting for this one to break lower and the reason is really when you do advertising in, from a lot of business people that I've talked to.

In my business to business things that I handle, a lot of them say the Facebook advertising really doesn't work with people that have forty to fifty thousand likes on their Facebook fan page and you know half the people don't even see your stuff anymore. So lot of the people that I discuss or talk to they don't use Facebook to advertise much.

In this concept looking at the company's as well, I was looking for it to go lower right here but it didn't. So just because it didn't doesn't mean you can't trade it just because you know I think the company isn't going to be as great maybe sometime down the road. That doesn't mean I can't trade it to the upside so right here was our pattern.

Here was our resistant lines that broke multiple times, it got rejected three times here but this time here we go here was the pop. Here was the pop on 43-44 million shares and it's popping higher and it’s got juice so you know you can't deny that and you have to go with where the energy is.

I'm not going to be silly saying “Oh well I don't like Facebook or I don't think their advertising model is working”. For now it is moving to the upside and for now this this might not even be you know a steak or chicken this could be the rocks and it may take it a year or two or four years for it to do its thing.

Just like Yahoo, I mean look at Yahoo if we take it out to the monthly you know this stock was going from 97 to 2003, 4 years moving higher and then it stayed up at the highs for five, six, seven months and then over time it continued to sell off and so forth it's nowhere near that 100-200 dollar level that it used to be but you know things take their toll and their patterns.

The same thing with Facebook you know a lot of thing it's going to go with where the energy is and for now you know you can trade it to the upside because that's where the energy is heading and you look at the weekly, the weekly is starting to confirm that and if you want to play it on the real safe side you wait till it clears right here 82.28 so it’s up to you.

You can play it right here in this region but if you want to wait you can wait then there's nothing wrong with that.

We also have FXEN for those people that are into penny stocks I'm not big on them but you know they had a nice little pop but usually these penny stocks. I'll tell you this much after they pop they eventually sell-off and that's because they're cheap for a reason.

This could be an operator it could be a manipulator, you know 1,000,000 shares normally the stock trades let's see 300 three hundred thousand shares. So 300,000 at a dollar fifty five if you put in three hundred thousand dollars you can move that stock easy and that's not a lot of money for most big traders so just be aware that these things get manipulated.

Similar to like this lake where we had the bowler scare, this thing popped from 6-7 bucks went up you know twenty eight dollars once people got their money they took their profits and now back down at 10 bucks so at seven bucks to 10 bucks technically a three dollar gain but you see what happens is usually this is what happens with penny stocks as well and that's the thing with FXEN as well.

It did have a nice pop but you know chances are we'll see it go back down to about a buck or two.

MasterCard, this one moving pretty well so the highs were broken right here volume picking up then we had a second attempt, second little break right here BOM, BOM two moves, if you want to wait to be on the safer side wait for that swing point at ninety to break in you can enter it so if you missed the trade so far them that's perfectly okay but take a look at this stock.

Here was a nice little swing point over here, if you wanted to you could even go this route and have a couple swing points in there. This stock broke so even if you missed it that first or second day, take a look we had a gain of five bucks, 5-6 bucks nice stable company. Nice solid 20 percent that's why I would say it's one of those in the top twenty percent of the company's.

I would rather own this a MasterCard than FXEN, I mean just think about it I mean it’s a MasterCard which one would you rather be caught holding you know MasterCard or FXEN obviously this one.

In either case looking at this one it's moving pretty well we have a good share amount coming in and the same thing with Netflix same thing here we had at this one consolidating it had it pop. Earnings normally I don't read earnings as you know but even if then you wait for the consolidation.

Even if you waited till after the consolidation to happen still got 13 bucks, thirteen dollar run since that break right there fifteen dollars. So even if you missed that the first day and you got in second or third day you still would’ve had a 40 dollar run.

A 40-dollar run on a stock in just twenty days, twenty seven days forty dollar run, come on look at the bigger picture look at what's going on and what's happening with these stock's and trade the right stocks. Trade that top 20 percent. Keep that 20 percent that's working, you don't have to trade the bad companies, you don't need them. You don't need them in your life, they don't do anything for.

You might get lucky here and there but why risk it? This game is about risk, it's about probabilities, it's about risk and it's about money management. Why do you feel that you need to go out and chase after the other eighty percent of the companies that you know may have that golden shiny object or may have that lottery winning move for you.

It's not about getting one home run trade you know it's about being consistent time and time again and you see that normally the stocks that I share with you are the same over and over and over again over and over again and I’ll wait for the setups and it may take months, it may take weeks but then want to see a nice little setup for example like in this one there you go.

Nice setup the stock popped right here popped. Even if you missed it, even if you missed it and those people that think they got to getting it right away even if you missed it you wait you wait for 14 days. Fifteenth day it broke those highs with heavy volume and then it continued for a 10 percent gain in just 10 days.

There's no way you're going to get that out your bank and its still moving higher. That's all you need you just need one or two of these stocks that’s it that's all you need.

User request, RIG, typically I like to take a look at the weekly and also the monthly and this stock is not looking healthy. So we had a huge sell-off here, we had a little pop that means retracement what it means we continue to sell off, retracement.

Now these two swing points are creating our support. That support was broken down here, once the support was broken look out below so now where can we get to? Now we're coming up to this approach right here at those levels and now we're starting to break those levels.

If we go out to the quarterly I mean this stock it's not looking healthy overhead volume. A appear A to B, B to C and C to D it’s not looking good and you know you might be looking at it right here saying oh it my go higher you might be looking at it right here it my go higher and it may it may go up to right here.

It may come and try and fill this gap and you know if you want to chase those that's fine me personally I don't like to go after against the trend so if we take a look at the monthly you know I don't like going against the trend like this.

When I see this that doesn't look healthy to me and once I start seeing that stock moving like this to that upside, maybe things will change may be then I’ll nibble some for a small position and then I could add some if it continues in my favor but right now there's no need for me to chase it.

In addition, even on that monthly it's creating almost a Doji here so I wouldn’t chase it.

Another one was RSX, this one as well, it's the Russia Vectors. This one had some interesting things you know I'm not bias one way or the other even though I am Russian. Here we had a little pop getting up but honestly it’s acting weak. It could be an opportunity to nibble some if it comes back here and bounces it could be an opportunity to nibble some shares but for me personally I wouldn't go after it.

Looking again at the monthly here we got big drop, big drop comes a bigger bounce and it didn't bounce all the way up to sixty. It bounced only to 43. Now again we had a big drop that means that bounce could come back to about let's say 21-22-23 and if you use Fibonacci you can get a good idea about it.

If we go with the weekly and we take it out so let's say we take the Fibonacci right here, from here to and then really 28.40, it could get to 31 and then maybe it'll sell off but you notice how these these things work out honestly I don't see it as being a healthy ETF. There are other plays out there. Why would you trade this one at eighteen dollars when you can trade something like SEE.

SEE which is the next stock I want to cover, this one popped higher continues to move and moving well or on the other hand even TRIP. TRIP, does that look familiar? Kind of like a Netflix really it’s kind a little consolidation right here and now popping a little higher.

I would think that this is a little too far extended so I personally do not like to chase and I wouldn’t want to chase this but it gives you some ideas, right? So if it comes back to here, see the bounce then you could possibly get it. Again it really comes down to your risk and reward profile.

Then we have the VNTV which we covered last week and here was one of the trend lines you could look at this here's another trend line you could look at it this way and this one just continues to move. You can also look at this as a little more of the cup pattern.

If you want not a perfect cup and handle but there's a little semi-circle shape consolidation but we do have volume increasing coming in. Breaking over these consolidation patterns and so far it's holding up. So in general on a big scheme of things look at that best 20 percent of the stocks that you're watching.

Whether that's an Apple, whether that's a MasterCard, look at the best ones. The ones that are going to give you the most return. Don't look at how many shares you can buy, look at the quality. It's kind of like…

Here’s a good example Facebook. A lot of people look at how many friends they have, quantity of Facebook friends, don't look at the quantity look at the quality of friends. The people you're hanging out with if you're hanging out with crazy people, people that don't add value to your life.

People that don’t motivate you, people that don't help you, people that don't just make you a better person or make you feel good they don't give you that warm fuzzy feeling then why would you hang out with them?

A lot of people you just say next and move on. In the stock market why do we not do that? We think that some of these people would add value to our lives, right? We think that some of these stocks are going to do better for us.

It’s kind of like the high school concept or in middle school people that want attention “Oh, I’ll hang out with this guy or that guy or we’ll talk about this and that so I can get some attention” and you don't need that and the same thing with stocks you don't need to trade the bottom eighty percent of the stocks.

You don't need those eighty percent, don't waste your time instead focus on the best 20 percent of the companies and even then I wouldn't even focus on the best 20 percent rather I would focus on the best 5 percent, the top 5 percent of the stocks that are moving.

The top five percent of the stocks that are going to give you the most for your money because you really just need couple of companies to really make your year and people say you got to diversify this and that. In theory, yes it's smart but I don't think that all your money is probably tied in one stock. I'm sure you either have a real estate or a house or some cars.

In retrospect you can diversify two stocks but for most people they just don't have the funds to diversify on a large scale. If you really want to diversify just pick an ETF and go that route I mean it's a lot safer bet but again it's based on you. Based on your risk and reward profile, based on your style, based on what's best for you.

It's not about me you know. It's not about what's working right for me, I give you some insight, I give you some train of thought to start making you think to start giving you some ideas that you can use to get better because I can't hold your hand for every single trade. I can’t give you the exact precise entries and exits.

No one can do that for you because they're not going to be there to hold your hand every time you make a trade, every time you know that you are thinking about a decision. You got to be your own person you got to make those decisions on your own. You got to be the adult and make the smart moves that are based on your life and your lifestyle.

Start looking at the bigger picture and don't just look at you know hey everybody is doing this or everybody says the stock is great, no, no, no! Look at yourself, what is the best stock for you. What is that best to 10 percent, 5 percent top and even 20 percent.

Just start there searching for the top twenty percent of the stocks and for me that's just to give you an insight and that is how I build my watch list is I look at stocks that are the top twenty percent patterns that have had patterns or that I see the way the stocks movement then I can identify those moves.

If I can’t identify them they're not in my lists and then I just wait for those stocks to set back up and then I just enter them on a large scale once they have a good pattern I'm comfortable with.

If they don't have a good parent then there's no need for me to trade them instead I would rather go swimming. I would rather take a vacation, I would rather you know read books, I would rather cook, I would rather do something else do yoga exercise you know why waste my brains strength.

Why waste the stress on the worst eighty percent of the companies. In this case focus on best of the best stocks. Focus on the ones that are going to give you the most reward so that way you can enjoy yourself. That way you can live a life that you're happy with or that just gives you a little peace.

You don't have to live in a multi-million dollar house but if things just make your life a little bit easier. If you just have a little bit of extra money just so you have a little more free time to spend with your family and that's all.

That's all you need. Don't have to chase every single dollar. Focus on the best of the best and then it'll be much more rewarding and much more peaceful trading and then you can have a lifestyle rather than those guys with the headphones that are just always you know trying to trade every single day in and out of the stocks.

You may want to do that from time to time but focus on the best once and then you can just let them sit and let them ride and when you're ready to cash out then just sell part of the stock, then you sell another little part and then you’re out then you find the next one.

That's all this business is, its patience. It's about choosing the best of the best and choosing the best horse to run the race.

I hope you got a lot out at this concept. It's a very popular concept applied to a lot of different things in life. So I hope it was insightful. I hope you have a wonderful week ahead of you for the weekend. Enjoy yourself and enjoy your time with your family.

Go do something relaxing or go do something exciting whatever it is that makes you feel good and just make it meaningful.

Thanks again for joining me thanks again for giving me your time I really appreciate it because I know and understand that your time is valuable and I don't want to waste your time so if you have questions feel free to shoot me an email and I'll do my best to respond back as the as quick as I can.

Thanks again and I'll see you next week.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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